I am fascinated that the government has at last gotten around to responding to the Senate Standing Committee on Economics report on Australia’s mandatory last resort home warranty insurance scheme. This report was tabled in the Senate on 13 November 2008, and I am delighted that finally, in June 2010, we have the government’s response. I ask myself, ‘Why is it that the government, having not bothered with this for all time, should suddenly decide that it is going to respond to the report right now?’ The answer simply is that it is a back-covering exercise. The reason is that this committee report, as indicated in my dissenting remarks, was an extremely weak report in the first place. I was very disappointed about it and made a number of dissenting remarks. The reason I am saying it is now a back-covering exercise is that everything that was alleged about this insurance product has come to pass between the tabling of the report and now. As the government itself notes, a number of home builders warranty insurance providers have either departed the market in recent months or signalled their intention to do so, given that the insurance is mandatory in most states and territories and the government says it is crucial that the insurance remains readily available. That is because they have left the marketplace and, come 1 July, we are going to have a crisis in the building industry across Australia.

Since that time there have been changes in New South Wales and there is yet another inquiry in Victoria. What is the Commonwealth’s response? Extraordinary! The response is: ‘The government calls on states and territories to explore options to harmonise and improve broader consumer protection measures in the building industry through the Ministerial Council on Consumer Affairs process.’ We are exploring options through ministerial process to a crisis that is going to take place on 1 July because builders are going to be left without this mandatory insurance. They will either have to build illegally, without the insurance, or not build, because from 1 July it is going to be very difficult for many builders to get this insurance product. They already owe under other schemes. They are already held under those other schemes and they cannot transfer easily to any that might suddenly be available.

What is the building industry supposed to do? Is it a solution to tell them that we are about to have a crisis and that the states and territories should explore options to harmonise and improve broader consumer protection measures in the building industry through the Ministerial Council on Consumer Affairs process? Too bad; too slow. This is not going to cover the back of the Commonwealth. There was an opportunity to deal with this issue two years ago. At the time, I said what should happen is that the Commonwealth should step in, stop it being a mandatory product and go with the system that is in Queensland, which works incredibly well, where the government sorts out this process and provides the kind of security that both the consumer and the builder need. But no, the government refused to do that.

After the Senate inquiry process it was demonstrated through an ombudsman’s report that information that was available on the public record was withheld from the Senate committee. I did not take too kindly to that. Nor do I take too kindly to the fact that the Housing Industry Association seems to have such incredible power over a number of state governments and, it would seem, in relation to the Senate inquiry. I am extremely unhappy with this vague response. The government thinks it is enough to say on the record now: ‘Oh dear, at the end of the month—this is terrible—a number of providers will have left the industry. It is crucial that the insurance remains available.’ No. It is crucial that the product ceases to be mandatory. If it is such a good product people will take it up voluntarily. It should not be mandatory. If we want to avoid a crisis in the building industry come 1 July, we should be moving here to say that every state must remove the mandatory nature of this insurance as it currently stands in order that the onus is not left on builders. I am extremely unhappy about the government’s response.

As to the other responses the government has made to my recommendations, I pointed out here that there was a deal done at one point during the Howard years where the builders warranty product was made a wholesale product rather than a retail product and then it escaped the scrutiny of some of those organisations that have oversight over financial products. The government said: ‘No, that is not a problem. Consistent with the Treasury’s evidence, the committee found that the regulation does not remove the product from all Australian government regulatory oversight.’ But it does remove it from some. My point here is that it ought not to be removed. There has never been an adequate explanation to the Senate or anywhere else as to why the government of the day and the minister of the day decided to make this product a wholesale rather than a retail product. At some point in the future, we will get an answer to that. But we do not have it now. I still maintain that we do not have the proper oversight and we do not have the information-gathering powers that we need.

As I argued at the time, we should have any form of home warranty insurance included in the national claims and policies database. The government noted the recommendations but said that some states are already collecting data on home building warranty insurance or are proposing to do so and that will need to be taken into consideration in the ministerial council’s review. That is not good enough. Why shouldn’t the data have to be collected and included in that national claims and policies database? There is no satisfactory explanation for why that is not the case.

This whole thing has been a really questionable process. It is a questionable product. Inquiry after inquiry has demonstrated that it is junk insurance. Tasmania had the courage to abolish it, and the sky has not fallen in in Tasmania since its abolition. Queensland has a good system. Other states go through inquiry after inquiry and we have now ended up in a situation in which the builders of Australia—particularly those in Victoria and New South Wales—are in a very vulnerable position.

If we have the crisis in the building industry that I anticipate come 1 July, I put the government on notice now that just putting in a response to the Senate committee’s report some 18 months after the committee reported saying, ‘Oh, dear: the product seems to have been removed. It’s crucial that the product remains available. Options should be explored and that should happen through a ministerial council process,’ is not good enough. This is going to swing right back to the government in this winter break. I urge the government right now to get serious about this and move immediately to remove the mandatory nature of this product to stop the crisis in the industry that is about to ensue.